Revolving loan fund business boost

The city of Coon Rapids is boosting its financial assistance for businesses that want to locate or expand in the city in an effort to bring more jobs to the community.

The Coon Rapids Housing and Redevelopment Authority (HRA), which comprises the seven members of the Coon Rapids City Council, has approved a revolving loan fund (RLF) management agreement with the Central Minnesota Development Company (CMDC).

At the same time, the HRA allocated $353,444 to kick start the revolving loan fund, taking $250,000 from the HRA account plus $103,444 from the city’s development fund, which derives its revenues from previous loan repayments on Minnesota Investment Fund loans to three businesses.

The agreement with CMDC, which is based in Andover and is a Small Business Administration (SBA) premier certified lender authorized to provide SBA 504 financing throughout the state, includes marketing, loan packaging, loan underwriting and loan servicing.

According to Mike Mulrooney, CMDC founder, president and executive director, CMDC will be marketing the city’s revolving loan fund program to businesses wishing to locate or expand in Coon Rapids as well as handling the loan packages.

These loan packages might well include both the city’s revolving loan fund and SBA loans that CMDC has available, Mulrooney said.

“We will be able to create packages that will be very attractive to business and industry,” he said.

Coon Rapids is not the only city that CMDC has worked with on revolving loan fund programs, Mulrooney said.

For example, a similar agreement has been in place between CMDC and the city of Brooklyn Park for a number of years, he said.

“It has been successful,” Mulrooney said.

According to Matt Brown, city community development specialist, the city’s economic development strategy approved by the council in 2010, recommended setting up a revolving loan fund to provide gap financing for capital improvements that bring job creation, redevelopment or investment in older commercial districts.

In recent years, the city has approved loans for a few projects with CMDC providing credit analysis for a fee covered by the applicant, Brown wrote in a memo to the HRA.

“Rather than continuing to use this approach, staff recommends developing a more aggressive and effective RLF administered by CMDC,” he wrote.

CMDC was recommended by Brown because it’s a major SBA lender in the area, it has a positive track record working with the city on various development projects, it has relationships with lenders outside the city and it has experienced lending staff.

According to Brown, the revolving loan fund program will be targeted at industrial projects as well as redevelopment projects in older commercial areas, such as Coon Rapids Boulevard and Northdale Shopping Center, and will be designed to leverage other private financing.

Criteria for loan approvals outlined by Brown to the HRA include:

• Projects must be located in Coon Rapids and be a for-profit business.

• Maximum loan amount will be $100,000 with certain exceptions.

• At least 50 percent of project financing must come from a private lender or private equity.

• Borrowers must put money into the project, the amount to be determined by CMDC.

• Loan proceeds can be used for fixed assets, including land, building, machinery and equipment, but not for working capital.

• Interest rates will be determined by market conditions at loan closing.

• Final decision on all loans will be made by the HRA at it regular meetings.

“Because application and processing costs will be incurred by borrowers and administrative fees will be offset by interest income, there is no cost to the HRA,” Brown wrote in his memo to the HRA.

Mulrooney founded what was then the Coon Rapids Development Company (CRDC) in 1978 after spending three years with the city, 1975-78, as its economic development coordinator.

At that time, CRDC was the first SBA certified development company in Minnesota.

According to Mulrooney, the CRDC became the Central Minnesota Development Company in the 1980s because its success in providing SBA loans to new and expanding businesses in Coon Rapids prompted other communities in the county to want to take advantage of the program.

The board of directors, made up of area citizens, approved the expansion of the program and the name change which resulted in CMDC servicing all of Anoka County, Mulrooney said.

A federal law change in 2005 lifted eligibility restrictions on SBA certified lenders like CMDC, which can now provide SBA loans statewide, he said.

Over the years, CMDC has made loans to over 500 companies in Anoka County, creating and retaining more than 8,000 jobs, said Mulrooney, who is a member of the board of directors of the MetroNorth Chamber of Commerce.

According to its website, the mission of CMDC is to “promote economic development by cultivating a financing environment that allows small business to grow and prosper.”

One of more than 500 SBA lenders in Minnesota, CMDC consistently ranks as one of the top 20, the website states.

Peter Bodley is at peter.bodley@ecm-inc.com

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